While fixing the culture is a huge problem, it’s true that Mayer does have to figure out a strategy for Yahoo! that makes sense. Personally, I haven’t been sold yet on the notion that Mayer can focus Yahoo! on being a “products” company that competes straight up with Google, Facebook, Microsoft, and countless other companies and startups. Even from the company’s earliest days, Yahoo! has always been a hybrid of tech and media. Becoming more of a pure product company will not be playing to the company’s strengths and it puts Yahoo! head to head with extremely powerful competitors with huge piles of cash that have been already executing on that vison for years.

McClure’s thesis is that Yahoo! should focus on women. He states that Yahoo! already is strong in many verticals that appeal to women, is led by a female CEO, could brand itself as the best tech company in the world at hiring females in leadership positions, and that by partnering or acquiring sites and apps aimed at women that Yahoo! could really do some damage.

My hat is off to McClure for coming up with an idea I hadn’t heard before, and I’ve talked to a lot of people about Yahoo!’s strategic options and spent a lot of time thinking about it. Focusing on women has some pros and cons:

Pros

It would give Yahoo! an answer to the question “What is Yahoo?!” and give the company a purpose and direction.

It defines Yahoo!’s target market in a way that everyone understands, and gives a focus to what products should be built and how they should be built.

It gives Yahoo! a hiring differentiation and in some ways an advantage over other valley competitors like Facebook and Google. Not only would women want to work there, but there are a lot of intelligent men who would want to work in a female-empowered environment as well.

It’s a direction that fits with having a female CEO who has been a role model for women in engineering and technology.

Yahoo! already has a lot of great female employees.

Yahoo! does have a nice foothold for the female market already, and through a couple of strategic acquisitions they could have a dominant stake. Think Pinterest, Sugar, Glam…

Cons

While there are huge advantages to focusing just on women, Yahoo! would be screening out the other half of the population, of which they have a lot of users today/

Some of Yahoo!’s biggest strengths are in verticals like Yahoo! Sports and Yahoo! Finance. Which skew heavier towards a male audience. Do you change those properties to focus more on women? Do you sell them off?

While they might not be the people Yahoo! wants, there would be talented employees who wouldn’t want to work for a female-focused company and work environment. My sense is that the hiring advantages would outweigh this con, it is something to consider.

Making an acquisition of one of the larger innovative companies that appeal to the female demographic to really make a big move like Pinterest or Zynga would be very expensive. Would it be enough to acquire a bunch of female-focused startups who don’t have major traction?

The “Is Yahoo! a tech or media company” debate could live on even though the target market would be much more defined.

Should Yahoo! Focus On Women?

I don’t know, this is why Mayer gets paid the big bucks. It’d be interesting to know if that is a strategy she could get past the mostly new Yahoo! board. I will say though that it’s the best strategy suggestion I’ve seen yet.

Congratulations on your role as the new CEO of Yahoo!. I’m sure you have no shortage of advice when it comes to determining what Yahoo! will be moving forward.

All of that is well and good, but the argument on tech vs. media, how many employees to layoff, what areas to invest in, what to do with ad technology, and every other issue you face don’t matter if you can’t fix the biggest issue at Yahoo! – culture.

Having worked at Yahoo! from 2007-2010 in the ad technology business, I worked with a lot of different organizations across many physical office locations. While the people at Yahoo! were generally really smart and good people, there were cultural issues that plagued efforts across the board and will continue to keep the company from succeeding no matter what the overall strategy turns out to be.

Since I’m rooting for Yahoo! to succeed, allow me to point out some of those issues along with some real examples with names removed. Even though I left in 2010, I have many friends at Yahoo! who tell me the problems still exist.

Penalizing the Smart People

The people inside Yahoo! tend to know that they aren’t putting out products at an impressive pace. This results in everyone knowing that decisions need to be made quickly, and there’s a pressure to get everyone on the same page and bought in. This can lead to group think, which is also dangerous when the group think is wrong.

One of the smartest people I’ve met in the ad business worked with me there and he had a tendency to think differently from the prevalent groupthink. This often led to him challenging the status quo in meetings and asking really tough questions, which quickly turned into everyone labeling him as an “argumentative blocker”. People didn’t bother to actually try and answer his questions or think deeply, they just avoided inviting him to meetings as time went on. Even though he was also a great manager and got stuff done, his reputation for “being difficult” also led to him being passed over for a promotion in favor of someone who was essentially just politically neutral and wouldn’t ruffle feathers.

It made no sense to me that people would instantly label him as a blocker when he was saying some of the smartest things anyone had said. Smart people who think differently from the group shouldn’t be punished for asking legitimate questions and also providing answers that might be different from everyone else.

Treasure the smart people, listen to them, give them a platform, and embrace conflict of opinion while also moving decisions along quickly. As you probably know from Google, it is definitely possible.

CYA (Cover Your Ass)

Related to the previous issue, people have a hard time operating when decisions aren’t unanimous. It all stems from the desire to cover your ass. Very few people outside of the most senior managers were willing to actually take a stance on anything. In almost every meeting you could ask for an opinion and find that people would turn to everyone else in the room to try and hear the opinions of others first. Or they’d simply repeat the last thing their manager had said publicly about the subject.

Everyone was afraid of being wrong so much that they wouldn’t stick their neck out. The bizarre thing about this behavior was that in three years I never saw anyone get fired for being wrong, making mistakes, or even not being good enough. I only saw employees leave the company by their own choice or get laid off when cuts were made.

Reward people for sticking their neck out and having an opinion they will fight for, and get rid of those that work behind the scenes to gather support or can’t make a decision without buy-in from everyone in the room.

The More the Merrier

A side effect of everyone wanting to CYA, meetings always grew larger and more frequent. This problem was terrible because it came from both directions. First, the meeting organizers often wanted buy-in from as many people as possible so they’d invite anyone who might possibly be involved. Second, anyone who knew even the slightest thing about the subject was offended if they weren’t invited to the meeting.

This often led to more meetings because so many people would be invited you could never get a decision made. It seriously seemed like certain people’s entire role at Yahoo! was to be invited to meetings and then block any progress from happening essentially just by their presence.

Take a lesson from Steve Jobs and kick people out of meetings who aren’t there to present or make a decision.

Throw More People At It

Anytime there was a product being planned or not enough progress being made the solution was always that more “resources” were needed, which invariably meant more headcount.

After Yahoo! purchased Right Media in 2007, instead of building on top of Right Media’s technology the decision was made to build Right Media’s functionality as well as Yahoo!’s existing premium ad serving functionality into a new product called APT. I can’t tell you how many times the fact that 800-1,000 engineers were working on the project was touted by executives and others as if that number made it a guaranty it would be successful.

On the contrary, I’m positive that having that many people involved has been a detriment to the development of APT. There were literally no people who really fully understood how the whole product worked since everyone was in their own silo. There were also huge problems with each release with things breaking because so many teams had their hands in the cookie jar.

Right Media was built with about 50 engineers, and Yahoo!’s premium internal ad server was built initially by a team of about 10 engineers. For some reason duplicating this functionality and adding a bit more into a new product suddenly took 15 times as many people?

Additionally, part of the culture was that managers and executives often were concerned with and touted the size of the number of people they were managing. Isn’t it more impressive to get as much done as you can with as few people as possible?

I think you can help solve this Marissa since Google puts much smaller focused teams on specific products. Yahoo! can get just as much done if not more with fewer people on every project.

Embrace Your Acquired Talent

I joined Yahoo! when Right Media was acquired by Yahoo!. Like most technology acquisitions, a big part of it was to improve Yahoo!’s ad technology talent. While I personally always felt embraced, a lot of my Right Media colleagues felt like they ignored, challenged, or frustrated by bureaucracy so much that they left within a year or two and Yahoo! lost out on a lot of potential impact.

While acquisitions are tough for any company to integrate properly and many times startup employees are just not suited for larger organizations, companies like Facebook and to some extent Google have done a much better job at keeping the employees for longer or deriving more value from them than Yahoo! ever has.

I’m sure part of your strategy Marissa will be to acquire some hot technology startups. Instead of letting the people get boxed out and end up leaving in a year extremely frustrated, embrace them, give them power, and help them be scrappy startup people who can build amazing products for Yahoo!.

Yahoo! Is a Safe Job

I literally interviewed candidates who said to me that they were applying to Yahoo! because it was a well paid and safe job that didn’t require them to work too hard. Say what? The kicker is that some of these people got hired despite my protest.

Yahoo! shouldn’t be hiring people who view it as a safe and easy place to work. If this is still happening, it needs to die immediately. While there is a lot of A-level talent in the company, a lot of people got hired who are really B- to C- people.

2nd Place Is Good Enough!

The scariest cultural problem at Yahoo! is that many employees and managers started to believe that it was okay to be in 2nd place. It wasn’t everyone, but it was a common statement in reference to competitors in various businesses. This attitude most likely grew out of Yahoo! being 2nd to Google in search and having to come to grips with the fact that was never changing. Being in 2nd place was nothing to scoff at from a revenue perspective, however Yahoo! was guaranteed to lose the moment the idea that 2nd was good enough started to pop up in the organization. Once people think that way, they’ll never work as hard as they need to work and think aggressively enough to be successful.

Bring back the competitive desire to win Marissa. Accept nothing less than winning. Give people the confidence that they can win. Anyone who thinks 2nd is okay at Yahoo! should head out the door.

Good luck Marissa. Worry less about the strategy and more about how to fix the culture. If it is still broken, there isn’t any strategy that will work.

There’s been numerous news reports about Google considering “buying” Yahoo!, or at least teaming up with private equity companies to do so.

While most of the articles at least mention in passing that it’d be unlikely for this to pass government review, I haven’t seen many people actually discuss why Google is involved.

Why wouldn’t a Google acquisition of Yahoo! pass government review? Well, if the Department of Justice wouldn’t pass the search deal that Google and Yahoo! worked up in 2008 where SOME of Yahoo!’s search results were powered by Google, then why would they actually let Google take part in buying all of Yahoo!?

In fact, many thought that Google knew in 2008 it wouldn’t pass government review, but tried to do the deal just so Yahoo! would turn down Microsoft and waste a lot of Yahoo!’s internal time (and it worked). I sat in many meetings at Yahoo! that were spent talking about the tests we were running with Google and how we were going to implement the deal.

There hasn’t been enough change in search market share for anyone to seriously even think it could pass. I’m not entirely sure if Google being only part of an ownership group with private equity firms would change the government’s view, but I doubt it.

Which leaves us asking, why is anyone even taking Google’s interest seriously?

I can’t answer why anyone is taking Google seriously, besides the fact that they are one of the only players who actually have the cash to do something around Yahoo!.

It just seems like any major involvement on there part is going to just raise big red flags with the governments of the world and will never pass “go”.

Why would Google get involved then?

I feel like there are two obvious answers to this one.

Google can pretend to at least have interest in Yahoo! to draw out how quickly something happens here. The more time Yahoo! is in limbo, and the more time Microsoft spends figuring out what to do about it, the better that is for Google to continue to separate itself from them.

Google can go as far as even floating prices out there to try and get others (Microsoft) to feel like they have to pay more in order to get Yahoo!. The more money someone spends on Yahoo!, the better that is for Google.

I suppose it is possible that Google really does want to keep Yahoo! out of Microsoft’s hands, but it seems like Microsoft having to acquire and digest Yahoo! would just allow Google to accelerate ahead even further ahead. It’s all just a ruse to waste time by complicating matters and drive up the price. Well played Google.

I found the firing over the phone ironic. When I was vice president at Yahoo! during the layoffs in 2009, I was requested to lay off 6 members of my team in person on the same day across three offices intwo different states. Naturally, I did as asked despite the impossible travel day it created, as I believed it was the right thing to do to have in-person conversations with people in those tough moments. Apparently Carol wasn’t given the same courtesy.

As news broke about Bartz’s ouster, the consistent chorus of people calling Yahoo! doomed or irrelevant began to ring out. Yahoo! has indeed been troubled, but I believe it can and should be saved.

Yahoo! wants to be the “premiere digital media company”, which is the right goal based on their strengths, where the world is headed, and what their competitors are likely to focus on. Let’s take a look at those strengths.

Personalized Front Page
There aren’t many personalized portals like My Yahoo! left, but Facebook and Twitter seem like the new generation of this to compare against My Yahoo!, which still has a tremendous amount of traffic.
1. Facebook
2. Twitter3. My Yahoo!

Mail
Yahoo! Mail has been the leader in email for a quite some time. If anything there is a larger threat from Facebook messages, mobile texts, and other forms of communication than from direct competitors.1. Yahoo! Mail
2. Live/Hotmail
3. Gmail

Search
The big daddy of properties, Search is a primary revenue driver. While the Comscore data has Yahoo! and Bing being close and flip-flopping, Compete does have Yahoo! Search at #3.
1. Google
2. Bing3. Yahoo! Search

Photos
This one is tough to measure now, as Facebook’s photo data is not broken out, and mobile startup Instagram is quickly becoming a player. Twitter is also making more of a move here recently. Since it’s clear Facebook is now #1 even without the data broken out, it shakes out like this:
1. Facebook2. Flickr by Yahoo!
3. Photobucket
4. Instagram

Instant Messenger
Tough to measure how Facebook and Gmail chat compare here since neither one is broken out in the Compete data. If I had to guess, I’d say Yahoo! is ahead of Gmail chat but I’m not sure what Facebook’s usage looks like.
1. Skype2. Yahoo! Messenger
3. AOL Instant Messenger

Sports
Another one of Yahoo!’s outstanding gigantic properties, Yahoo! Sports is the leader in game even though ESPN calls itself “The Leader”.1. Yahoo! Sports
2. ESPN
3. Fox Sports

Entertainment
OMG is a great example of what Yahoo! can do, as OMG launched later then competitors and is now dominating them.1. OMG.yahoo.com
2. TMZ.com
3. People.com

Women
Like OMG, this is another newer Yahoo! property that started much later in the game but is now crushing the competition.1. Shine by Yahoo!
2. iVillage
3. Cosmopolitan

Local
The competition is really close here on the Compete data so this order could end up being wrong.
1. Google Local2. Yahoo! Local
3. Local.com
4. Yelp

Maps
The Compete data has Mapquest being ahead of Google in web visitors, but with mobile factored in Google is the clear leader.
1. Google Maps
2. Mapquest3. Yahoo! Maps

Travel
It’s a very competitive space, but Yahoo! still puts up a good fight against some heavyweights.
1. Expedia
2. TripAdvisor
3. Priceline4. Yahoo! Travel

Games (Web-based)
Gaming is now getting fragmented with web-based games, games on Facebook, and games on mobile. If we look at just web-based games including Zynga on Facebook, Yahoo! comes in at #3.
1. Zynga/Facebook
2. Pogo.com3. Yahoo! Games

Movies
This is one of those “kind of silent but really powerful” Yahoo! properties. How many startups would kill to have 20M users like Yahoo! Movies does?
1. IMDB.com2. Yahoo! Movies
3. Fandango

Music
Would you have guessed Yahoo! Music was #1 in music properties with over 18M estimated users? Me either. This is a dangerous one though as music consumption changes to become more mobile and application-based.1. Yahoo! Music
2. Pandora
3. Last.fm
4. AOL Music
5. Rhapsody

Shopping
When it comes to comparison shopping engines/portals, Yahoo! comes out on top again. To be fair though, Google’s “shopping” section can’t be pulled out in Compete data, but it’s not really the same type of shopping portal. Amazon.com and eBay are also larger, but are different types of sites.1. Yahoo! Shopping
2. Bizrate
3. Shopping.com

Dating
Yahoo! outsourced Yahoo! Personals to Match.com in a move by Bartz. However, Yahoo’s Match.com subdomain is still #2 in the market:
1. Match.com2. Yahoo.match.com
3. PlentyofFish
4. eHarmony

Fantasy Sports
This is harder to tell traffic on with Compete as Yahoo! has a subdomain for it but redirects it to sports.yahoo.com. Despite that, while working at Yahoo! in 2010 I know that Yahoo!’s Fantasy Football was #1 in the market, so I’ll hazard a guess that it’s it’s in the top 2 in this lucrative market.

Health
Yahoo! Health has a strong showing in another very lucrative advertising category that also generates high traffic.
1. WebMD2. Yahoo! Health
3. MedicineNet

Autos
Despite entries from all the portal companies as well as industry powerhouses like Autotrader, Edmunds, and Cars.com, Yahoo! Autos comes out on top.1. Yahoo! Autos
2. Autotrader.com
3. Edmunds

Downloads
While not the sexiest category these days, it still drives millions of users. Yahoo! is #2 in downloads and is very close in traffic to #1.
1. Download.com2. Yahoo! Downloads
3. Softpedia

Greetings
Yahoo! outsourced their Greetings to AmericanGreetings.com, but their subdomain still comes out to #4.
1. AmericanGreetings.com
2. 123Greetings.com
3. BlueMountain4. Yahoo! Greetings

Calendar
Comparable data is not in Compete, but Yahoo! Calendar is either #1 or only surpassed by Google Calendar for web-based calendars.

Address Book
Comparable data is not in Compete, but Yahoo! is in the top 3 for web-based address book with Facebook and Google. Apple is obviously a huge player with this phone-based address book now.

Data Summary
It’s actually quite shocking to run through so many important categories and see that Yahoo! is a leader or one of the top companies in that space. Any of their positions alone would be an amazing startup or growing company, but doing it across so many categories is really impressive. It may not be flashy, but Yahoo! is getting the job done in a bunch of those spaces.

Additionally you can bring in other businesses here that aren’t really “consumer” facing like Yahoo! Small Business, Web Hosting, Domain Registration, Yahoo! Ad Network, Right Media Exchange, and others.

Also not covered above is how Yahoo! fares internationally in many of those properties in other countries. It’s all over the map (literally), but some of the international regions are stronger than the USA in overall dominance. Not to mention the ownership value of various Asian assets.

Yahoo!’s Weaknesses

What makes Yahoo! vulnerable is that they are doing well in all those categories above, but primarily just from a desktop computer experience.

The Facebook Effect
Facebook has already been stealing Yahoo!’s thunder in various categories for a while now, but it remains a huge threat. Facebook doesn’t compete with Yahoo! on identical products, but does things like make a traditional front page unnecessary, or replacing email with Facebook messages and instant chats.

If or when Facebook starts making moves into running their own socially-enabled properties like “Facebook News” or “Facebook Sports”, Yahoo! may have even more trouble ahead.

Social in General
Handled above by the Facebook effect, but Yahoo! will continue to lose out to Facebook and other social applications if it doesn’t improve rapidly in this area. It’s not for a lack of trying, but Yahoo! has now essentially outsourced a lot of their social stuff to enabling Facebook and Twitter on their properties.Mobile and Tablets
Compared to Google, Facebook, and Apple, Yahoo! is very far behind in the mobile world. It’s clear they’ve already lost as far as “utility applications” are concerned on mobile devices.

The question they need to ask is how they make Yahoo! News the default mobile news application across all mobile devices? How do they make Yahoo! Finance the default financial application? They don’t seem to be moving aggressively enough in their leading categories to become the “premiere digital media company” on mobile devices.

It’ll be interesting to see where Yahoo! goes next with their leadership and strategy. They have a lot to work with as you can see from above, and I know a lot of talented people are still there looking to make it happen.

After finishing over three years at Yahoo! and almost 3 years previous to that at Right Media, I thought it’d be worthwhile to write about my experience over that very interesting time and set of events.

This is simply my perspective as I know that others at Right Media and Yahoo! had completely different opinions and feelings about everything that occurred from 2004-2010. That being said, let’s take a walk down memory lane.

Joining Right Media

In late 2004 when my longtime friend Brian O’Kelley (currently CEO of AppNexus) reached out to me to see if I wanted to join a startup called Right Media. Brian was the CTO of Right Media and had built some interesting auction technology for their ad server. They wanted to start going more aggressively after publishers and he thought I’d be able to help with that effort.

I had a good job I enjoyed at Palo Alto Software, a Eugene-based business that is the leader in the business planning software space. I had worked there for four years and was managing a small team running their ecommerce site PaloAlto.com, as well as their main content properties Bplans.com and Mplans.com. In my spare time at night, I also was operating a site I started in 1997 called Wakeboarder.com that I later sold in 2006.

Despite the good job, I wanted the opportunity to join a younger startup and online advertising was a field that I had good experience in and was passionate about. My role was to do business development, product, and support work for medium to small publishers for Right Media’s ad network. Additionally, I looked forward to working with Brian again as we had started our first web business together in 1995 and worked together numerous times since (including a fun dot-com bomb in 1999).

Right Media was a New York company, but when I joined I made it clear I had no plans to move from Eugene. Fortunately, Brian and the rest of the executive team (Michael Walrath, CEO and Christine Hunsicker, COO) allowed me to start building a publisher-focused team in Eugene. When I joined my wife was excited for me to be able to work from home since we had recently had our 2nd child. However, after a month I had already hired three great people and found office space. It was off to the races.

Right Media Growth

When I joined, Right Media was an ad network with some interesting and differentiated auction technology that helped power the network. It had not yet become an ad exchange, but the ad network itself was growing well. I helped build Right Media’s self-service publisher signup, and we began bringing in publishers at a steady clip. it’s funny now to think back to 2005 and how we were talking to publishers like “TheFacebook.com” which was at the time a few young college kids who didn’t know much about advertising for their college social network.

Not too long after getting the office space setup in Eugene the company started making the move to the crazy concept of an ad exchange. We had to go sell other ad networks who were our competitors to use the Right Media Exchange as their ad server or as an additional place to access supply and demand. It was a strange notion to many people externally, but it made a lot of sense to everyone within the company. Even then we didn’t know what would happen when we connected our ad network to another ad network to see how the buying and selling would perform on one platform. Fortunately, it worked quite well.

The Eugene Office Entrance

The team in Eugene kept growing as we brought on engineers, account managers, and product managers to help support the publisher and ad network pieces of the exchange. The whole company was growing as well, but we were a startup within a startup. A bit of a strange concept, but we communicated with the team in New York well and I spent a fair share of time traveling to New York along with trips on the West Coast to meet with clients and attend conferences.

The time during 2005-2007 was amazing as every month saw growth and progress in the business. The Exchange continued to grow, improve in quality, and it started making real waves within the online advertising industry. We felt like underdogs taking on the establishment to change the industry, which is one of those things that makes startups so much fun and addicting to many people.

There were problems with quality, hiccups with the exchange scaling, and problems with spyware and other issues that the company took very seriously and worked through diligently. I think those things really kept us on our toes and kept us so busy that you really couldn’t stop and marvel at the fact that we were doing billions of impressions per day by the time 2007 hit.

During 2006 though our team in Eugene had noticed that small to medium publishers were having a tough time working with the complexity of the Right Media Exchange. We used the APIs to build RMX Direct which was later renamed to Direct Media Exchange.

This product was the first self-service publisher yield optimizer that was a simple ad server that allowed publishers to get demand from the Exchange while also managing and auctioning their inventory to 3rd party ad networks like Google Adsense, Valueclick, and others. This was a forefather to the products later built by companies like Pubmatic, the Rubicon Project, and AdMeld.

Direct Media Exchange also was experiencing the same kind of rapid growth and success of the Right Media Exchange, but at a smaller scale that was a bit more under the radar. The team in Eugene was pretty proud of what we’d built together.

Pre-Acquisition

My first personal experience with Yahoo! directly came in 2006 during Ad Tech San Francisco. At about 10 am on the first day, Brian told me that he had a meeting scheduled with Yahoo! down in Sunnyvale that afternoon that he could no longer make due to an important meeting at Ad Tech. He suggested I go along with Ant Taylor and Kees Schouten who were both at Ad Tech as well. What was interesting about this was that Ant and Kees were actually in their first week on the job at Right Media and didn’t even really know what their roles were yet. Additionally, I had no context for the meeting besides that “we are talking to Yahoo! about becoming a client.”

We headed down to Sunnyvale and met with Ryan Christensen, who was doing Pricing and Yield Management for Yahoo!’s display business. We managed to get through the meeting even though we lacked context and really spent most of the time learning about how Yahoo! was currently running their non-guaranteed business and talking about how Right Media’s Exchange could help with some of those problems.

Later that summer I was in New York when a group from Yahoo! came to meet with the Right Media executive team. The morning of the meeting, Ant and I were tasked with building a presentation for one portion of the meeting. As a great example of the hectic pace of the startup world, we again lacked context and tried to scrap our way through it anyway. As you’d expect, we created a terrible presentation that wasn’t usable for the meeting. The meeting apparently went well, but the panic I felt that morning was something I’ll never forget.

In October of of 2006 things really started to get more real as Yahoo! invested $40 million into Right Media for 20% of the company and to become a major client of the Exchange. This was a huge win both from a company stability perspective financially, but it also provided a marquee quality client who validated the Exchange in the eyes of the industry.

Of course, there were feelings internally and rumors abound through the rest of 2006 and early 2007 that Yahoo! might want the whole company. As visitors from Yahoo! became more frequent to the offices in 2007, it was a not so subtle secret they were doing due diligence and diving deeper on our technology.

After spending Monday through Thursday at a conference my flighted landed in Eugene and I received a call from Christine Hunsicker our COO. She said I needed to be in New York by 9:00 am the following morning to demo Direct Media Exchange to people from Yahoo! and to bring along our lead product manager and lead engineer for the product. I told her this would be tough as I hadn’t been home all week and it was already Thursday afternoon. She said she wasn’t asking if I could do it or not, so we drove the two hours to Portland to take a red eye to New York.

We flew all night, changed in the bathroom at JFK, and then made it to the Right Media offices a bit late. The three of us walked into the main Right Media conference room where there was a few Right Media executives and then a number of executives from Yahoo!. At the time I wasn’t familiar with any of the Yahoo! executives as it was my first time meeting them, but it was a pretty high-powered tech crowd in the room consisting of SVP of Product Mark Morrissey, SVP of Engineering David Ku, Chief Scientist Qi Lu (now the President of Online Services at Microsoft), VP of Product John Slade, and halfway through the meeting Jerry Yang also made an appearance.

We were asked to demo Direct Media Exchange so we connected our product manager’s laptop to the projector. Remember, this was after a night of travel and no sleep. As the demo begins, the first thing everyone notices is his Firefox toolbar is set to Google as the default search engine. Oops, strike one!

After some half-joking and half-serious comments about the toolbar, I gave an introduction to the product and ask our product manager to login to the application. He then clicked on the username form field and hesitated. I wasn’t sure why he was doing so, but he gave me a look that let me know something was wrong. I urged him to proceed, and he typed in a Gmail address to login to the application. Apparently it was the only address he had with administrative priviledges. Oops, strike two!

We endured some more jokes that were increasingly serious, but then continued to give a quality demo of the application with plenty of good dialog. I thought we’d moved past the early mistakes when we were asked whether we were building a specific future enhancement. Our product manager responded “Absolutely, I’ve already created some mockups I can show you.” I wanted to bang my head on the desk at that point, as I knew what was coming and he opened up mockups that he’d recently created in MS Paint. That’s right, they were screenshots of our app with hand-drawn new features scribbled on it. A true professional mockup! Strike three?

Fortunately, the strength of what we’d built and the traction we’d achieved with Direct Media Exchange in the demo was what ended up hopefully being memorable. The company overall ended up being a compelling option for Yahoo! after Google had just ponied up $3.1 billion for DoubleClick just a few weeks earlier. Yahoo! purchased the remaining 80% of Right Media it didn’t already own for $680M making it one of the largest ad technology acquisitions of all time.

The Acquisition

Getting acquired is an extremely interesting experience. Of course the team celebrated, as it was a large acquisition and it really validates what you’ve been working so hard on. This was the goal right? Or at least one of the big goals?

On one hand you are happy knowing that your company’s stock is now liquid, and you have the hope of the business becoming even bigger and achieving more success with the “endless” resources of the acquiring company. It was also exciting to go work for one of the pioneers of the web who had big businesses in so many areas online.

However, even having never been through an acquisition, I knew many things were going to change. Immediately the people in our Eugene office began to wonder what would happen to them and if our Eugene office would be closed. At this point we had over 30 employees in our Eugene office but people wondered if they’d have new managers, if they’d be laid off, and what would happen to the products they were working on.

The acquisition process and integration itself for me personally was good. It could have been improved probably with more structured education on Yahoo!’s businesses and such, but I felt very welcomed by employees at Yahoo!, and got to immediately start spending time in various Yahoo! offices teaching people about Right Media and what we did.

On my first trip to the Burbank office a group of employees I had just met invited me with them to an Anaheim Might Ducks playoff hockey game. It was a good experience to get to know them personally and see my first live hockey game at the same time.

Moving to their IT systems and and way of working was also pretty easy, but there were still challenging questions the companies had to work through. What would happen to the Right Media brand? Do we integrate websites? What do we switch to Yahoo! technology and what don’t we? Can we still use Google Analytics to track our sites? Most of these things got resolved over time without too much trouble.

Post-Acquisition

After the honeymoon period was over more challenges began to pop up. Specifically, there were strategic questions that showed everyone was not perfectly aligned on where everything was headed and how it should be built. Should we build on top of the existing Right Media technology? Should we start and build a new ad platform from scratch that has the functionality of Right Media combined with the guaranteed ad serving system Yahoo! had built in house?

After the decision was made to build a new platform from scratch (APT) there were then issues trying to keep building Right Media Exchange functionality as many engineers had been moved to work on the new project. Additionally, many engineers had to work on scaling Right Media itself with all of Yahoo!’s added volume and integrating with Yahoo!’s finance systems. This left little room in the road map to keep pushing Right Media as hard as many of us had hoped.

Despite this, there was a lot of excitement over the new system being built and the strategies to do some amazing thing in the display advertising space.

Personally, I had been promoted and was excited about taking on responsibilities at Yahoo! that also went outside of Right Media. It was interesting to learn about new areas of Yahoo!’s business and work with so many new people within the company. I’ve heard other acquisition stories where people from acquired companies were buried in the bigger organization and not given prominent roles. Yahoo! definitely gave various people at Right Media strong roles within the company, although there are definitely people who did get stuck in unfortunate situations.

Microsoft Acquisition Attempt

Not too long after getting settled in at Yahoo!, Terry Semel was replaced with Jerry Yang as the CEO and Microsoft went public with their acquisition offer. This was a very interesting time to say the least. It was a rapid ascent to being a startup striving for attention every day to having Yahoo! on every news site all day long with rumors and speculation about the Microsoft acquisition. People tried to not make it a distraction, but I think everyone would be lying if they said there wasn’t a lot of time spent reading that speculation online every day and talking casually around the offices about the situation. For the most part it seemed like most projects kept their momentum as everyone knew that it was a long way from happening for sure.

Everyone I talked to internally loved the idea of locking in a stock price in the $30s, but no one was very excited about having to integrate two companies of that size with different cultures and missions. I felt the same way, and was wondering what would happen to Right Media in the situation of an acquisition.

Of course, it all fell apart. It was followed by the attempted search deal with Google and it ended Jerry’s time at CEO. In retrospect based on the stock price alone you’d have to classify that it was a mistake for Yahoo! to not take one of the Microsoft offers. However, Yahoo! is still a profitable independent company today which I’d say is better for the overall health of the web than if the acquisition had been successful.

Besides the Microsoft acquisition, Yahoo!’s display strategy was also affected by the economy going into the recession. A lot of the ideas around building guaranteed cross-selling relationships for display didn’t make a ton of sense when every publisher was struggling to sell their own inventory alone. This turned a lot of the development of the APT platform to be on building it internally for Yahoo! while continuing to support the Newspaper Consortium who was using the product to run their display ad businesses and sell Yahoo!’s inventory to local advertisers.

The soured economy led to two rounds of layoffs as well. Laying off members of my team and seeing former Right Media employees in Eugene was definitely the lowest point at Yahoo!. Some of the decisions on who to layoff just didn’t seem to make any sense, although struggling to figure it out has never gotten me anywhere. That being said, the company definitely felt overstaffed to me at the time, so it seemed like layoffs did make sense for Yahoo! overall.

The New Yahoo!

After all that drama, Carol Bartz was brought in as CEO and began to make changes throughout the company. Carol did a nice job shutting down certain products and businesses, selling some pieces of Yahoo!, and the change brought some executive turnover and org structure changes.

Unfortunately, one of those products that got shuttered was Direct Media Exchange. While it was sad for our team in Eugene who built it, the reality was that the code hadn’t been touched since the Right Media acquisition. The product had continued to grow and was doing over 20 billion impressions a month and was easily profitable since there was only a small team doing customer support for it. I was a believer though in the company’s mission to focus, and smaller publishers were not a priority of the company as also demonstrated by the shutting down of the Yahoo! Publisher Network product for small publishers.

The major area though that Carol “outsourced” was the search technology business to Microsoft. This became a huge strategic focus for the company and I took the opportunity to move completely out of the Exchange area into B2B Marketing to run the marketing for the Search Alliance with Microsoft. It was a nice change of pace to work on search, work with Microsoft directly, and to work with a new group within Yahoo!.

During this period our office in Eugene was closed as our lease ran out and we were down from 30+ employees to 7 after the two rounds of layoffs, people moving to other Yahoo! offices, or leaving for other job opportunities altogether.

It became clear to me over this time though that I was getting the entrepreneurial itch again and I wanted to get back to building products. One of nice things about a big company is there are specialists to perform almost every task, but I felt more and more like I spent my whole day just talking to people internally while doing status reports and internal presentations. While there is some value in that, it feels like I was disconnected from products and customers. I could have explored moving into other parts of Yahoo!, but I really wanted to start a company and get back to being an entrepreneur.

Overall

The bottom line was the whole thing was a positive experience for me. I’m glad Brian initially recruited me into it and that the Right Media executive team was supportive of building a presence in Eugene.

It’s interesting though is how perspectives can differ, because I know some people at Right Media felt the acquisition was a very negative experience for them. For me though it was positive to have Right Media stock become liquid, I was exposed to many things I never would have learned in a startup or small company, and I got to have front row seats to some very interesting things happening in technology. The best part really may have been many of the friends I made along the way, many of whom I’m sure I’ll work with again. Not a bad way at all to spend the early part of my 30s.

I wish the ending would have turned out different for Direct Media Exchange, and I wish the momentum of the Right Media Exchange wouldn’t have slowed down. As I was leaving Yahoo! though, it appeared that more emphasis was being put back on that business so hopefully that continues that way.

Last week investor/entrepreneur, and head of startup incubator YCombinator, Paul Graham penned another one of his outstanding essays for his site. The topic of this latest essay is Paul’s opinion about what “happened” at Yahoo! (my former employer as well), and specifically what he noticed in his time working there that formed his opinion of “what happened at Yahoo!”.

The point of Paul’s essay is to explain why he thinks Yahoo! “got hosed” and is a place where “things went wrong”. This is a standard theme in the media over the past few years as Yahoo! has consistently been compared to first Google’s rise, and now Facebook’s, and how Yahoo! failed. I don’t have too many problems with Paul’s essay itself. He’s speaking about his own experience at Yahoo! and why he thinks there were some fundamental issues that haven’t allowed the company to achieve as much success as he or others expect. I do have a few points of contention though, such as saying that no company has made a technical turnaround from a death spiral when there is such an obvious example sitting out there in Apple, but I can leave those for another day. Overall, it’s a very interesting read to get Paul’s perspective. As you’ll soon see, Paul’s obviously not alone in thinking that way.

My biggest problem I had with Paul’s essay was actually the reaction of how some extremely smart entrepreneurs and tech investors referred to Paul’s article on Twitter. Here are some samples:

According to Paul Kedrosky, a well-known investor/entrepreneur/blogger, Yahoo! is already dead. I know it’s a figure of speech, but isn’t killed a bit aggressive for a company that had $1.6 billion in revenue in Q2 and operating income of $175 million? No, that’s not Google, but it’s not Altavista either (since they actually are dead).

Investor/entrepreneur/blogger Henry Blodget says Yahoo! collapsed! Did I miss this? I wonder where my paychecks were coming from for the last three years? Blodget is actually sort of employed by Yahoo! on the TechTicker show, so he should know that no collapse ever occurred. Even if you aren’t happy with how Yahoo! has performed compared to others, collapse is just sensationalistic.

Investor/entrepreneur Keith Rabois calls Yahoo! “lost”. This is not as bad as aggressive as “killed” or “collapsed”, as I can see someone arguing that Yahoo! hasn’t had a clear sense of direction at various times over the last decade.

Many others also had similar comments on Twitter about the post. What I found interesting about all this is how so many smart people in the tech space who see first hand how hard it is to build successful web businesses are so willing to tear Yahoo! apart. How many of these investors or entrepreneurs will ever build a company the magnitude of Yahoo? How many of these people would just LOVE to build one company that was in the top few companies in it’s space when Yahoo! is currently in the top three and often #1 in almost every category (Search, Mail, Homepage, News, Sports, Finance, Messenger, Women, Entertainment, etc.) They keep talking about how it’s all on a decline, and in some cases that is occurring, but in other places Yahoo! continues to grow in these areas.

How many web companies have actually lasted 15 years with the amount of success Yahoo! has had and continues to have? Isn’t it amazing that Yahoo! is still doing so well when the majority of companies that started when they did flamed out in 1999-2001?

Don’t get me wrong, Yahoo! has it’s share or problems it will need to tackle to stay as popular and relevant as it’s been. The web is changing rapidly and Yahoo! will have to innovate to keep up. They have thousands of employees working on it though, and I’d give them a better shot than the rest of the “media” companies out there to be the next-generation media company as TV/magazine/print continue their decline. Will they be the leader in search or social? No, but why does everyone expect them to be?

My employer Yahoo! announced the acquisition of Citizen Sports yesterday. As an avid user of their iPhone application Sportacular, I can personally attest that get social and sports really well, and it’ll be interesting to see what they do hooked into the #1 sports destination on the web in Yahoo! Sports.Read More →

My employer Yahoo! is celebrating it’s 15th birthday. That’s quite an amazing feat for an internet company, as it doesn’t seem all that long ago that I was first checking out Yahoo! as a high school senior browsing with NCSA Mosaic when it first started to grow.

Yahoo! has had it’s fair share of trials and tribulations over the years, but it’s gone through and emerged from all the phases of the web as a leader, and continues to be a leader in so many areas today.